Excision of a Tc1 transposon of Caenorhabditis elegans is thought to leave a DNA double strand break. We report here that sequence polymorphisms in a transgenic DNA template are copied into the corresponding chromosomal gene upon excision of Tc1 from the chromosome. This shows that the double strand DNA break resulting from Tc1 excision is repaired with the extrachromosomal DNA as template and that sequences flanking the break can be replaced by sequences from the transgene. Transgene instructed break repair provides a method for the targeted introduction of precise alterations into the Caenorhabditis elegans genome.